When it comes time to report results, consolidated financial statements and stand-alone statements provide two ways of looking at the companies' performance.
A consolidated financial statement covers the activities of the parent company and its subsidiaries in a single report, as if they were all a single company operating under one roof.
Tracking intercompany transactions is perceived as one of the most common problems with financial consolidation Intercompany transactions are transactions that happen between two entities of the same company.
Not adjusting intercompany transactions results in consolidated financial statements that do not offer a true and fair view of the group’s financial situation.
Stand-alone financial statements, by contrast, treat each entity as if it were entirely separate -- the parent unrelated to the subsidiaries, and the subsidiaries unrelated to one another.